Caixin
Dec 26, 2018 10:00 AM
DOING BUSINESS IN CHINA

Detained Canadians Provide Reminder of Beijing’s Mixing of Business and Diplomacy

As many of us observe the holiday season with eggnog and visits with friends and family, this week’s column turns to a couple of far less fortunate Canadians who are spending the time in Chinese custody. Their plight, which I’ll detail shortly, underscores a major risk of doing business in China that’s quite real even if only rarely seen. That risk is the possibility of getting caught in the crossfire when diplomatic tensions flare between Beijing and other countries.

In this case the tensions are between China and Canada, following the latter’s detention of a top executive from telecom equipment giant Huawei for possible extradition to the U.S. to face fraud charges. This is hardly the first case of this type. In my more than two decades in the region, I’ve seen numerous similar instances involving spats with China and a wide range of mostly Western countries, including the U.S., France, Japan, Norway and South Korea, to name a few.

Truth be told, such spats are pretty par for the course with any country, and usually end up getting resolved with relatively little fallout beyond tense diplomatic words and perhaps a slap or two on the wrist. But China often seems to take things a little more personally by letting these tiffs expand into other realms that can sometimes claim resident expats as collateral damage.

Before I embark on my latest cautionary tale and provide some words of advice from the experts, I should be very upfront and say that this kind of risk is quite minimal and occurs only rarely when major tensions flare. But that said, I’ve personally witnessed the consequences among friends and acquaintances on several occasions over the years, so it’s clearly something to consider, even if it’s not part of a formal China business plan.

At this point we’ll back up and recount the latest story in greater detail for anyone who is still reading news during what’s traditionally one of the slowest weeks of the year. The story began on Dec. 1 when Huawei Chief Financial Officer Meng Wanzhou, who also happens to be daughter of the company’s founder, was detained while transiting through Vancouver’s airport. She was later granted bail while awaiting a hearing that will determine whether Canada will send her to the U.S., where she would face fraud charges related to sales to Iran that violated earlier U.S. sanctions.

China has made no attempt to resolve the matter in a low-profile way, and has loudly demanded Meng’s release and made its wishes known to the U.S. and Canadian ambassadors in Beijing. Since the story broke, two different Canadians living in China have also been detained in separate cases, both over allegations that they engaged in activities that threatened China’s national security. China hasn’t indicated the detentions are related to the Huawei spat, but nearly everyone out there believes this is the case based on similar past experience.

Retaliatory history

One of my earliest memories of this kind of retaliation dates back to 1999, when a NATO alliance accidentally bombed the Chinese embassy in the capital of the former Yugoslavia — killing three — during a conflict over the Kosovo region. Following that conflict, Chinese turned out in huge masses to demonstrate outside the U.S. embassy in Beijing, and reports at the time likened the situation to being under siege.

No Americans that I know of were injured at that time, but I clearly remember an American friend telling me about his fear of simply going outside when the tensions were highest. I wasn’t personally here at that time, but I got to see similar tensions flare twice with Japan, and once each with South Korea, Norway and France over a wide range of disputes over the last 15 years.

Several Japanese friends and acquaintances told me they feared for their personal safety when the most recent incident clash with Tokyo occurred in 2012. The university where I taught at that time also had to take precautions to calm the nerves of a group of visiting Japanese students at that time.

The most recent such incident occurred just last year when China objected to a U.S.-supplied anti-missile system being installed by South Korea at the height of tensions with the North. I didn’t hear of any South Koreans here in China who felt insecure about their personal safety at that time. But a wide range of South Korean businesses did suffer when some found their products boycotted by local Chinese and others suddenly found themselves shut down for violation of various Chinese laws.

That raises a broader complaint among foreign businesses here in China, namely a particular form of selective law enforcement that often gets used whenever government officials find it convenient. Such “discretionary enforcement of rules and regulations” was a top concern among Europeans in the latest annual sentiment survey by the European Union Chamber of Commerce in China, and similar sentiment was expressed by members of the American Chamber of Commerce in China.

As to how to handle this risk, most of my contacts said the case is still hypothetical in their many years here because they’ve never personally had to deal with it. But nearly all said they would allow an employee who felt uncomfortable to leave China and work outside temporarily if she or he felt uncomfortable during such tensions. One said the wife of an employee actually did feel nervous after a flare-up with the U.S. two years ago, and that the couple was allowed to work from the U.S. for several months until things settled down. Many people said the best approach when working in China is to maintain a low profile, and don’t do anything that could be perceived as even remotely illegal or in violation of industry norms. That can sometimes be difficult in a land where so many things are done in gray areas that exist between actual rules and industry practice. And even when you do everything according to the book, there’s really no way to protect yourself against patriotic sentiment that occasionally gets whipped up during such diplomatic clashes.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com

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